Vodafone Idea Shares: Vodafone Idea shares fell by 4%, now forecast to fall further by 23%!

Vodafone Idea Shares: Vodafone Idea shares fell 4% in early trading on Thursday, February 12. The fall came after a report by global brokerage firm JP Morgan, which had predicted a fall of up to ₹9.

JP Morgan downgraded the telecom company’s shares to “underweight” and set a target price of ₹9, which implies a downside of about 23% from Wednesday’s closing price. Although Vodafone Idea shares have risen significantly over the past six months, rising about 77% during this period, JP Morgan believes this recent outperformance is overpriced.

Future depends on bank funding and capex

According to JP Morgan, the next big trigger for Vodafone Idea is to get funding from banks to fund the next phase of its capital expenditure. The brokerage says that without investment in network expansion, it will be difficult for the company to arrest its declining user base and add new customers.

Vodafone Idea raised around ₹18,000 crore through a follow-on public offering (FPO) in Q1FY2025, marking the beginning of the first phase of its capital expenditure. This helped the company stop the pace of subscriber decline to some extent, but it was not enough to increase its subscriber base.

Question on triple EBITDA target

The brokerage also described the company’s target of tripling cash EBITDA in the next three years as aggressive. JP Morgan believes this estimate is based on market share gains, especially in competition with Bharti Airtel and Reliance Jio. However, the brokerage is maintaining a cautious stance on this.

According to JP Morgan, the company will have to face several challenges before it can stabilize its business, including securing bank funding and continuously expanding its subscriber base.

Are positive factors already visible in valuations?

At 15 times FY2027 estimated EV/EBITDA, the stock has already incorporated most of its upside potential, the brokerage says. Therefore, further progress may be limited. However, the company recently got a positive signal when promoter Kumar Mangalam Birla bought about 59.6 million shares of Vodafone Idea from the open market between January 30 and February 3. This provided some support to investor confidence.